Mark Carney calls the core financial system the Education Department tried to install in 1999 a 'stinker.' The agency's chief financial officer quickly grew tired of the configuration issues as well as arduous and complex testing processes.

Carney's frustration with ieFARS financial management system from ACS Government Solutions ended in 2001 when the department decided to scrap the system and implement Oracle's Federal Financials without any modifications.

'We realized [ieFARS] had a lot of deficiencies in what we wanted it to do,' Carney said. 'We had to decide what we could live with and what we could live without in terms of functionalities of the Oracle system.'

Education's decision to move to Oracle'one of six commercial software systems approved for federal use by the Joint Financial Management Improvement Program'represents a trend: Agencies are changing their business practices to meet the software's capabilities instead of customizing software to conform to their own procedures.

That's changed in part because the Office of Management and Budget has mandated stricter software standards for financial management systems, and JFMIP tests vendors' software to make sure it meets those requirements.

JFMIP is the proving ground for OMB's changes to financial software, similar to the role the National Institute of Standards and Technology plays in vetting IT security, authentication and other technology requirements.

Agencies also are shying away from customization because of the expense and risk involved. Many federal financial experts said it is easier to change their business practices to meet the software's functions the vice versa.

'In the past, agencies did the same thing in different ways simply because they were on their own, and that made it difficult to use commercial products,' said an OMB official who requested anonymity. 'Previous governmentwide efforts and the Line of Business initiative are establishing greater consistency. This creates a standard to which vendors can build..'

In 2003, OMB found that 10 of 13 agency core financial systems in development did not modify the commercial system, compared with only two of eight in 1999.

In fact, the number of financial applications developed by agencies has dropped by 9 percent, while the number of unmodified commercial applications increased by 9 percent in the same four-year span, OMB found in its 2003 Financial Management System Inventory.

The OMB official said nearly every large agency, including the Social Security Administration, the Energy, Health and Human Services and State departments, and the Defense Finance and Accounting Service, is upgrading or implementing a new core financial system. And the official expects all agencies to be operating new systems by 2007.

'There are a couple of things driving these replacements,' the official said. 'For example, there is the President's Management Agenda and the need to accelerate the reporting of financial statements in 45 days. Another factor is the quality and federal-readiness of the COTS products.'

Narrowing the gap

Karen Alderman, JFMIP executive director, said the gap is closing between commercial offerings and federal needs. But she warned that using commercial applications is still not plug and play.[IMGCAP(2)]'There are issues around integration and interoperability as well as data conversion and change management,' she said. 'Commercial financial systems should come with a warning that says, 'batteries not included, some assembly required.' '

John Simermeyer, Social Security's deputy associate commissioner for the Office of Earnings, Enumerations and Administrative Systems, knows well the integration challenges of new core financial systems.

The agency recently spent about $14.5 million to implement Or-acle's financial software. The agency did not ask Oracle for modifications, but it did have to install 40 middleware programs to make sure the feeder systems could talk to the core application.

But by putting in middleware, Social Security will be able to update the system more easily and maintain it for less money, Simermeyer said.

David Robinson, DFAS' comptroller and director for financial management, said his agency's contractor, American Management Systems, which has since been bought by CACI International Inc. of Arlington, Va., also relied on middleware for the agency's internal core financial system.

'We made a conscious effort not to modify the commercial system,' Robinson said. 'We changed our business process to fit within the system.'

Robinson said one example is the requirement to have money in a specific account that an employee is spending from. Under the old system, DFAS employees could spend money as long as it was available in any account.

'It was never an option to customize,' Robinson said. 'Since we maintain financial systems for all of the Defense Department, we had experience with what happens when you customize a financial management system. The vendor can't support it because the costs are too high.'

Education's Carney, who also is chairman of the E-Government and Systems Committee on the CFO Council, said OMB's Lines of Business financial management consolidation project will advance software and data standards, as well as help integrate grants and human resources processes.

Playing catch-up

While agencies are customizing less, JFMIP has not solved every problem. The OMB official said vendors' software still needs to catch up with some of the government's requirements for functions such as processing purchase card data.

This is the one area where agencies still are modifying systems to meet their needs, the official said.

The OMB official also said JFMIP has started to look at standards for budget formulation and interfacing with procurement and grants management systems.

'The products are becoming more federalized, and agencies are becoming smarter about the risks of customization,' the OMB official said. 'With extensive customization, the risks of project failure, or a system that is successfully implemented that doesn't meet the agency's goals, is too great.'